The Effects of Tipped Sub-minimum Wages on Tipped Workers' Employment and Earnings

The federal subminimum wage has been $2.13 for twenty-three years, and nineteen states currently follow the federal policy. Twenty-five states plus the District of Columbia have implemented subminimum floors above $2.13, but below their regular minimums, and seven states do not allow for a subminimum wage. At present, 40 percent of the U.S. workforce is located in states that pay $2.13; 43 percent work in states with subminimum wages from $2.23 to $7.00; and 41 percent of the workforce resides in no-tip credit states where the sub-wage is currently $7.25 to $9.32. What effects do different state subminimum wage policies have on earnings and employment?

Economists Michael Reich and Sylvia Allegretto will conduct a research study of the effects of the subminimum wage received by tipped workers, also known as the tipped wage. Examining these effects may provide insight into the proposed bill H.R. 1010, Fair Minimum Wage Act of 2013, which was introduced in the Senate in March 2013. If enacted, the federal minimum wage would be raised to $10.10 an hour over the course of two years, and the minimum tipped wage would rise to $3.00 an hour. Reich and Allegretto will use data from a panel of the Quarterly Census of Employment and Wages (QCEW). They will aggregate the QCEW data by state, year and quarter for full- and limited-service restaurants and merge them with relevant state data, including unemployment rates, minimum wage, and tipped wage.

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